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Uber Turns to Saudi Arabia for $3.5B Cash Infusion

230 points by taylorbuley 10y ago

nikolay 10y ago
And that's precisely why I will boycott it and switch to Lyft! Edit: It looks like there's Saudi money in Lyft as well. :(
- breitling 10y ago
  Good luck with that. Saudi Prince Al-Waleed bin Talal invested in Lyft [1] [1]http://blogs.wsj.com/digits/2015/12/24/saudi-prince-alwaleeds-firm-leads-247-7-million-investment-in-lyft/ http://blogs.wsj.com/digits/2015/12/24/saudi-prince-alwaleed...
  - nikolay 10y ago
    Thanks! Well, I rarely use either. :) Anyway, Buycott [0] needs to add a Saudi filter! [0]: https://www.buycott.com/ https://www.buycott.com/
- Larrikin 10y ago
  All the reprehensible stuff uber has done in the past, has made Lyft my goto app. Talking to Lyft drivers recently I've seen fewer and fewer that are driving for both because of negative experiences with uber. If Lyft can keep it up they might actually end up being on top Edit: Why the downvotes?
  - macspoofing 10y ago
    >Why the downvotes? I think it's your first sentence. You can't just throw that out there as if everybody knows what you're referring to. I certainly don't. I don't follow the company religiously, but I have no recollection of anything majorly evil done by Uber.
    - buzzdenver 10y ago
      I' not the OP, but he could have referred to this: http://www.theverge.com/2014/8/26/6067663/this-is-ubers-playbook-for-sabotaging-lyft http://www.theverge.com/2014/8/26/6067663/this-is-ubers-play...
      - HappyTypist 10y ago
        Which is out of context because Uber only started doing it after they caught Lyft bootstrapping that way.
craigvn 10y ago
Blood money while they continue to execute people in the street.
- breitling 10y ago
  Get off your moral high-ground. We (USofA) still continue to execute people as well.
  - seizethecheese 10y ago
    Get out of your moral valley, get a better vantage on the moral topology around you. The USA executes people, true, but generally not political opponents. Saudi is an order of magnitude worse than the US government.
    - gorkemyurt 10y ago
      guess who is Saudi's biggest trade partner? https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia#List_of_trade_organizations https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia#List_o... or who actually sells them guns? https://en.wikipedia.org/wiki/Saudi_Arabian_Army https://en.wikipedia.org/wiki/Saudi_Arabian_Army
      - seizethecheese 10y ago
        Your point that the US is complicit and that our hands are not clean is well taken. There is a moral topology, this isn't black and white.
    - deleted 10y ago
      [deleted]
  - dangerlibrary 10y ago
    two wrongs something something. Moral relativism isn't universally accepted, whether you like it or not.
  - christophrb 10y ago
deleted 10y ago
[deleted]
CPLX 10y ago
Sincere question, can someone explain to me a plausible scenario at this point by which early investors actually receive a payout even slightly commensurate with their supposedly incredible investment? For example, how can someone in the seed round genuinely be able to cash out given the unbelievable amount of dilution that has taken place. What are the plausible scenarios where this occurs? EDIT: Specifically asking in the context of a valuation that seems to way outstrip any plausible IPO (or complete takeover) valuation, and almost certain liquidation preferences that accompanied these later institutional rounds.
- paulsutter 10y ago
  Uber has apparently raised $12.5 billion[1] and is valued at over $60 bilion. So seed investors are in fat city as long as the valuation holds. If the valuation goes down, it all depends on the preference multiples (which are likely greater than 1), and how low the value goes. Uber has very significant revenue and growth (see the new Mary Meeker presentation), so they are a very valuable company. It may not be wise the way they are burning cash in China but hey we're all just spectators. [1] Crunchbase says $9B and hasn't been updated to add in this money), https://www.crunchbase.com/organization/uber#/entity https://www.crunchbase.com/organization/uber#/entity
  - rexreed 10y ago
    It's only Fat city if there's an exit at that valuation. We're talking Theranos style valuations here that can disappear at any time. They better find an exit scenario before the music stops or it's a world of hurt, especially for the later stage investors.
    - supster 10y ago
      True, but those are the obvious risks you take as an investor. And late stage investors often negotiate downside protection in the form of liquidation multiples or ratchets.
      - 10y ago
Retric 10y ago
Uber needing 3.5B is a huge negative sign IMO. Clearly something is broken with their business model.
- sintaxi 10y ago
  I tend to agree however its completely plausible the raising is used just to chase after new markets.
- koolba 10y ago
  > Uber needing 3.5B is a huge negative sign IMO. Clearly something is broken with their business model. If someone is willing to give you $3.5 billion dollars I'd argue you've got a solid business model. Either that you're just really good at raising capital.
  - rexreed 10y ago
    Let's revise "solid business model" to "solid ability to sell the company's value". A solid business model doesn't require this sort of continuous cash infusion.
    - rqebmm 10y ago
      require != want
    - jessedhillon 10y ago
      > A solid business model doesn't require this sort of continuous cash infusion. Where is this assumption that this cash is required coming from? A very common use for investment is to accelerate plans which would otherwise unfold over long/impractical timelines. Another common use is to get ahead of competitors. I know much of HN is very eager to see all billion dollar valuations deflate so as to prove that extremely conservative risk profiles are the only strategies worth considering, but there's nothing inherently troubling about a highly-valued, late-stage company raising so much money.
      - 10y ago
slg 10y ago
Putting aside whatever you think about Saudi Arabia or its government, it is inarguable that this move will be highly controversial. It makes me wonder why Uber pulled the trigger on this knowing there will be a backlash. Wouldn't it have to be because of pricing? I wonder if the leadership of Uber simply didn't want to see any dip in the valuation and Saudi Arabia was the only one out there willing to meet that price. It makes me think that $62.5 billion value is completely unrealistic.
- deleted 10y ago
  [deleted]
- dharmon 10y ago
  First, public backlash has not stopped Uber from doing things before. Second, all the smart money is either sitting it out and/or can't invest at these levels, and Saudi money in a tech startup is definitely dumb money.
godembodied 10y ago
So what if they execute people for what they think are crimes? Who are you to judge what people should or should not do? What you label as evil someone will label as good. There is no absolute evil/good, as you're trying to portray it. It only your opinion vs. their opinion.
- jd3 10y ago
  While this is somewhat true, it's a somewhat ridiculous argument to bring up when talking about saudi arabia. I think the west has come to the general consensus that women have rights, and that people should not be beheaded in the streets for denouncing their state religious authority. This hermeneutical matter-of-interpretation crap is no defense for the crimes against humanity that saudi arabia commits regularly.
  - godembodied 10y ago
    All of the things you mentioned are relative to a culture. Since you were born in the West, you think of all these things as bad. The indoctrination is so strong that you feel that your opinion is an objective fact. But, the same seriousness and objectivity you attach to your opinions they attach to their. Morality is kinda religion - everyone thinks their God or prophet is the TRUE one, when in fact they've been indoctrinated from early childhood to belive some magical stories. This hermeneutical matter-of-interpretation crap is no defense Do you think you can invalidate something by labeling it as 'crap'? I guess schools today don't teach people how to respond with arguments, instead of insults.
    - Retra 10y ago
      Unless you're about to say you don't have a culture, maybe you should accept that people will argue according the culture they have and leave it at that. It's like I said "I like pepperoni pizza," and you're trying to say "no one kind of pizza is objectively better than the rest, so you have no right to choose pepperoni pizza over any other pizza." But in fact I do have this right, being that I'm the one choosing which pizza to eat. If I disagree with someone's morals, it's because I'm the one who's choosing which morals to disagree with. The "who I am to judge" is the one who's doing the judging. Just like you are with your inane position here.
kafkaesq 10y ago
"Excuse me driver, can you pull over for a minute? I need to beat my servant." http://www.cnn.com/2013/10/31/world/meast/saudi-arabia-beating-video/index.html http://www.cnn.com/2013/10/31/world/meast/saudi-arabia-beati...
- cloakandswagger 10y ago
  Rumor has it they're working on an on-demand servant beating service called Uber Beats.
  - iask 10y ago
    Lol...you guys on a roll!
- educar 10y ago
  Do you know what came out of the investigation? This was in 2013.
- iask 10y ago
  Funny...lol. I flew past this post and then suddenly started laughing.
Animats 10y ago
Latest Uber worry: When the Tesla 3 comes out, Uber drivers clogging the fast-charging stations. "Free power for life" is a great deal when you're a cab.
- maxerickson 10y ago
  I was going to speculate that they will charge for access, but Googling to get the Supercharger name right lead here: http://arstechnica.com/cars/2016/06/no-free-superchargers-for-teslas-model-3-h2-stations-grow-in-ca/ http://arstechnica.com/cars/2016/06/no-free-superchargers-fo... Announced today, they will charge for access.
  - semi-extrinsic 10y ago
    Wow, based on the access fee for the early lowest power Model S, along the lines of $2500, if not more? That's what, more than two years of fuel for an economic petrol car?
    - maxerickson 10y ago
      Sure, but it also carries a $15,000 premium over a car that at least matches it on various utility comparisons.
    - bryanlarsen 10y ago
      I certainly hope they don't charge a flat fee, that'll just make the problem worse, not better. Once you pay the fee you'll be inclined to use it as much as you can, "just to get your money's worth". Sort of like how most people overeat at all-you-can-eat restaurants. They need to make sure they charge more than the retail rate for electricity. Make sure it's cheaper to charge at home. It'll still be almost an order of magnitude cheaper than gas.
- rconti 10y ago
  Elon has always said "access to supercharging". Never said free. Supercharging is a high speed charging process via their stations (I think 440v). The price is completely separate from whether or not you can perform the action.
tomp 10y ago
Saudi Arabia? A country that is itself seeking a cash infusion?! http://www.ft.com/cms/s/0/9dd8cbfe-2755-11e6-8ba3-cdd781d02d89.html http://www.ft.com/cms/s/0/9dd8cbfe-2755-11e6-8ba3-cdd781d02d...
rock57 10y ago
according e.g. to the stories linked below and many previous reports, Uber actively aims to reduce the number of cars on the road, and its efforts, especially Uber Pool will reduce the oil consumption and, as a result, oil prices... And now they get the largest investment yet from a party that is NOT interested in falling oil prices... What am I missing here? https://newsroom.uber.com/us-new-york/taking-1-million-cars-off-the-road-in-new-york-city/ https://newsroom.uber.com/us-new-york/taking-1-million-cars-... http://www.theguardian.com/sustainable-business/2016/may/31/uber-millennials-us-cities-cars-austin-lyft http://www.theguardian.com/sustainable-business/2016/may/31/...
- linkregister 10y ago
  It seems smart for a sovereign wealth fund to try to diversify its holdings. Exxon and Chevron also invest in renewables, despite the fact that renewables potentially cannibalize oil sales.
- hnhire_me 10y ago
  > And now they get the largest investment yet from a party that is NOT interested in falling oil prices... Uber's impact will be the same whether they invest or not. Saudia Arabia needs to diversify its holdings and sovereign funding sources as oil is a very narrow and volatile vertical upon which they currently hang their hat (and almost all of their funding). Saudia Arabia is like an investment portfolio where 90% of its income comes from a single stock. They need to diversify and hedge.
- dragonwriter 10y ago
  > And now they get the largest investment yet from a party that is NOT interested in falling oil prices... What am I missing here? Saudi Arabia (and even moreso prior to the 1990-1991 war, Kuwait, which was among the sources of the tensions leading to that war) invest quite heavily in diverse investments with a focus both on growth and avoiding having fortunes too closely tied to oil.
- eruditely 10y ago
  earlier this year the deputy crown prince declared his intent to sell 10% of saudi amarco and said he wants to diversify holdings. they're in really bad shape right now.
Mendenhall 10y ago
What I find particularly interesting is Uber now has someone on their board who thinks women should not be allowed to drive? It will be interesting to watch this play out and take note of their policy and public statements. I can see many sources of conflict in such a decision.
- dragonwriter 10y ago
  Women are not allowed to drive in Saudi Arabia, but that doesn't mean that the particular official given a board seat believes that they shouldn't be allowed to drive (or even that the monarch believes that that's the way things should be, generally; just because its not a democracy doesn't mean that Saudi government policy isn't shaped by a desire to appeal to particular constituencies.)
  - Mendenhall 10y ago
    I agree with your statement completely. The thing I notice is he works for the government and I would think he would never be able to say that openly. A competitor could instantly draw that into question and make them defend the point and use it as a propaganda tool. If he says women should be able to drive he goes against the kingdoms laws and those constituents, if he says they shouldnt or stays mute the propaganda one could spin is legion. "Uber board member thinks women shouldnt be able to drive for them"
    - morgante 10y ago
      I think you're overthinking the likelihood of that becoming a controversy. Sovereign wealth funds routinely invest in companies which run contrary to government official policies. Their foremost duty is as investment managers, not politicians.
      - Mendenhall 10y ago
        I dont think it will turn into a controversy at all, but a smart competitor versed in propaganda could easily hit that attack vector. "Ride with Uber and help raise money to suppress women!" "How do you feel as a Uber driver knowing board members dont think women should be able to drive and your actions help support that?"
michaelbuddy 10y ago
60 billion as compared to Microsoft, Lockheed Martin, AT&T, Google. I mean basically we're talking about a high end phone app and supporting company infrastructure around that. 60 Billion for Uber. I'm just not seeing it.
- xufi 10y ago
  Same here. I do wonder what is up other companies are up to while Uber is doing this. What about Lyft?
arzt 10y ago
Where does Uber rank historically in terms of private capital raised by a pre-ipo tech company? I would imagine very close to #1?
mmayberry 10y ago
Uber wants driverless cars and Saudi Arabia is already half way there...
methehack 10y ago
I've always been a little confused about uber's capital needs. When I first heard about uber, the part I thought was super-clever was that you wouldn't _need_ lots of capital because all the drivers would have their own cars. Leveraging the latent capital of one side of the two-sided market was the genius of it. (Airbnb too) Same for the staffing -- hook up both sides of the market. No need to pay anyone out of your pocket -- in fact, probably there'd be some float for you there. Sure, maybe you have to subsidize one side at first, but not forever. So where's all this cash going? Is the driver side being subsidized to a ridiculous degree still (this is, actually, my guess)? Is there a moonlander (driverless car) in the works? Are the G&A costs off the charts? How could that be, give that the software does the connecting? Is the software _that_ hard to write? I mean, it's good, but it ain't rocket science. (I'm not sure rocket science is even rocket science anymore.) If I'm right that all the cash is still going to make the fares cheap to encourage up-take, it seems to me like Lyft (or another/any fast follower) is in a fantastic position. Let uber burn the capital to sell the idea to consumers, and then step in when it stumbles and walk away with the glory and gold. Place your bets.
- cylinder 10y ago
  Exactly. They are burning cash to gain market share and will lose that share as soon as they stop. Not many barriers to these apps. Uber is going to implode.
  - ng12 10y ago
    Here's the thing -- ride sharing is the least interesting thing about Uber. Uber's expertise is on-demand logistics which is a totally new field at this scale. Ride sharing just happened to be an easy first step. Once they're able to move things around in real-time at a global scale the opportunities are massive.
    - CPLX 10y ago
      People say this a lot, so I am not picking on you, but I don't get this argument at all. Amazon does it, so does Lasership and Seamless and Fedex and WalMart and a million other variations. I don't see any real reason Uber is more adept at adjacent non-core market verticals than any other top tier entrant.
fma 10y ago
Uber has a higher valuation than actual car manufacturing companies (GM, Ford, Honda, etc) http://www.forbes.com/sites/liyanchen/2015/12/04/at-68-billion-valuation-uber-will-be-bigger-than-gm-ford-and-honda/#10b6c8855858 http://www.forbes.com/sites/liyanchen/2015/12/04/at-68-billi...
johansch 10y ago
So Uber will not be moving to electric cars anytime soon then, I guess.
- tsmffh 10y ago
  Or, they're investing precisely because they will.
mnglkhn2 10y ago
This might have to do with uber's recent effort to become a capital provider for when someone wants to lease/finance a car in order to drive for uber. Those $3.5bn are most likely capital to fund this operation. Uber is getting into financial services.
iask 10y ago
Uber is a fad...and will soon be be moved to the back seat...unless it's too late. One poster might be on to something "...they are trying to get enough money to sustain the subsidies until they kill all existing competition"...62bn for a ride-hailing company?
danielschonfeld 10y ago
I know this isn't new, but if companies have the abilities to raise money from international entities like this, at these kind of sums. All the while, people are locked to their country of citizenship for working rights... is globalization in its Capitalistic form not claiming as prisoners its own citizens?
gdltec 10y ago
Whatever the output, the Uber story will surely be an interesting startup/VC/capitalism case study in the near future.
khc 10y ago
If they can get cash at a good deal, why not? 10 years later, if they do make a truckload of money from overseas expansions, they can pay back their investors with oversea cash without paying American taxes. Double win!
- fiatmoney 10y ago
  It is typically not legal to pay out (via dividends or share buybacks) to different investors of the same class in differing amounts. I'm not enough of a tax lawyer to say if you can do a miniature version of that by buying back stock of a US company listed on foreign exchanges without repatriating capital, but after arbitrage you would expect the effect to ripple back to the US-listed share price by the same amount.
  - khc 10y ago
    This isn't about saving money per share, but using overseas money that many companies now avoid repatriating.
    - fiatmoney 10y ago
      Right, but you can't pay out specifically to overseas investors.
ilaksh 10y ago
Arcade City and/or similar decentralized peer-to-peer blockchain-based systems will make Uber obsolete. Same thing will happen in most other areas.
slackstation 10y ago
I think this is a bridge until the driver-less car can be developed. Once they hit the market, automation will take over but, that same automation will allow for a company with hyper-thin margins or people to loan out their car to a service that transports people. Uber wants to be that company but, there's nothing really stopping the market from having 50+ companies like Uber in it. There will probably be marketplaces that aggregate these smaller services into larger competitive exchanges with spot prices for a ride. If that's the case, it seems like it might take an awful long to make back the billions that Uber is pumping to make markets around the world. On the bright side, everyone has cheaper transportation.
tehabe 10y ago
Saudi Arabia wants to be more independent from its oil production and invest in a oil dependent business. That is satire, right?
- cjarrett 10y ago
  Agreed, most ludicrous thing I've read today
em3rgent0rdr 10y ago
The Saudis may have lowly motivations for this: Uber will lessen the demand to allow women to drive. http://www.forbes.com/sites/rebeccalindland/2016/06/01/why-ubers-3-5-billion-windfall-is-bad-news-for-some-women/#6a28218f1604 http://www.forbes.com/sites/rebeccalindland/2016/06/01/why-u...
sandworm101 10y ago
If Uber really is so unprofitable that it need saudi cash to keep things ticking over, then how is this not dumping? Few would doubt that Uber is disrupting taxi markets all over the place. That's fine so long as they are the better mousetrap. But if they require billions in cash at this point, long after they are a household name, then they aren't the better mousetrap. They are a cash-rich company trying to drive others out of the business by dumping below-cost product on the market. If their goal really is to survive long enough that they can do away with drivers, this is exactly the sort of practice that trade rules are meant to prevent. We cannot allow corporations to buy out entire markets because we know what happens once they do.
kriro 10y ago
A "we drive you" company taking financing from the only country in the world that prohibits women from driving. I guess that's somewhat noteworthy. Maybe some of that money goes towards Wali notification if a female passenger wants to take a Uber ride in Saudi Arabia. "Your protectee wants to take a ride from A to B. Accept/decline." It'll need an auto accept for women over 45 as they are allowed to travel alone.
syngrog66 10y ago
in short: lawyers, politicians (whether legal donations or illegal bribes), and accountants. each of which will vary by jurisdiction (city, county, state, nation, etc.) yes, the core server-side codebase design/code/operate will be about the same. yes, each taxi operator will own/buy/provide their own hardware. yes, the mobile platform app codebase is fairly unified/common. but... it's all those jurisdictional and market differences. plus, the advantage to subsidize and accelerate, that will likely cause the lion's share of thirst for bootup investor cash. Uber's biggest problem, as a 2000-ish YC/SF-style "software" startup is that there is no Amazon/AWS-like cloud provider of vehicular rides. Because you need, well, vehicles. Which are expensive and messy. Uber needs enough cash to ensure enough vehicles, plus those messy human drivers, plus all those locale/jurisdiction-specific requirements, are satisfied and ready. Human/political/legal costs don't scale up/down anywhere near as well as totally automatable solutions like pure software.
elmar 10y ago
This video explores the Unit Economics of the Uber business and doesn't look good at least in the US market. Why Uber Is A Scam - Math Explains https://www.youtube.com/watch?v=fgQPj90OrQE https://www.youtube.com/watch?v=fgQPj90OrQE
davidiach 10y ago
Can someone please explain to me why people are so much more bullish on Uber than on Tesla?
rajacombinator 10y ago
Raising this much from dumb money seems to be a bad sign ...
bogomipz 10y ago
“Of course we think women should be allowed to drive,” said Jill Hazelbaker, an Uber spokeswoman. “In the absence of that, we have been able to provide extraordinary mobility that didn’t exist before — and we’re incredibly proud of that.” Of course we think women should be able to drive but we have no problem doing business in and with a backwards repressive society that doesn't believe that women have the same rights as men as long as they give us money. Besides such inequalities are a business opportunity since those repressed women need rides. Hey Uber how about "disrupting" the farce that is the Saudi Royal Kingdom.
estefan 10y ago
Since I'm reading "Zero to One", let's try to answer Thiel's "7 questions": 1. Engineering - Have they created a "breakthrough" technology (10x better than current tech)? No. 2. Timing - Is now the right time? Maybe they're gambling that self-driving cars are only a few years away so they can subsidise human drivers until that happens in order to build a brand and demand/market presence. 3. Monopoly - Are they starting with a big share of a small market? Only by subsidising prices which isn't sustainable. 4. People - Do they have the right team? Not sure. 5. Distribution - Their app has widespread distribution and some key partnerships solidify that. 6. Durability - Will the market position be defensible 10 and 20 years in the future? I can't see why it would be. If they're betting the company on self driving cars, then that removes any benefit of a network effect based on a two-sided market. Fast forward 10 years and another well-funded company could pump a city with autonomous cars which would face little barriers to entry (barring regulation, but they'd probably ignore it like Uber have). 7. Secret - Have they identified a unique opportunity that others don't see? Not unless they can move into adjacent markets or have a major ace up their sleeves, but there are so many competitors that it would seem they haven't. They are obviously targetting economies of scale which would mean their plan is to keep prices so low no one else can afford to enter the market barring major technological innovation. This must be why they're burning so much cash. Self driving cars would remove one barrier to entry since once they exist there will be no need to have a pool of human drivers. So in that case there would be no network effect to act as a barrier, only any effects of economies of scale. That means there's potentially no monopoly being fought over, and therefore no monopoly rents to be gained. Economies of scale take funding to break into, but probably won't inherently create a monopoly with a significant defensible position a well-funded competitor couldn't break into. Is their valuation the result of a bubble because investors have few other places to put their money? Google invested, probably just hedging their bets or buying access to a future market, and now their valuation keeps spiralling...
hackney 10y ago
Considering Saudi Arabia likes their slaves, I find it quite coincidental they would invest in what is a perfect scheme to get uber to provide what for that country will be a ton of slave drivers. Remind me never to use uber.
TrevorJ 10y ago
Ironic that Uber would take cash from a country that won't even allow women to drive...

230 points by taylorbuley 10y ago

And that's precisely why I will boycott it and switch to Lyft! Edit: It looks like there's Saudi money in Lyft as well. :(

breitling 10y ago
Good luck with that. Saudi Prince Al-Waleed bin Talal invested in Lyft [1] [1]http://blogs.wsj.com/digits/2015/12/24/saudi-prince-alwaleeds-firm-leads-247-7-million-investment-in-lyft/ http://blogs.wsj.com/digits/2015/12/24/saudi-prince-alwaleed...
- nikolay 10y ago
  Thanks! Well, I rarely use either. :) Anyway, Buycott [0] needs to add a Saudi filter! [0]: https://www.buycott.com/ https://www.buycott.com/
Larrikin 10y ago
All the reprehensible stuff uber has done in the past, has made Lyft my goto app. Talking to Lyft drivers recently I've seen fewer and fewer that are driving for both because of negative experiences with uber. If Lyft can keep it up they might actually end up being on top Edit: Why the downvotes?
- macspoofing 10y ago
  >Why the downvotes? I think it's your first sentence. You can't just throw that out there as if everybody knows what you're referring to. I certainly don't. I don't follow the company religiously, but I have no recollection of anything majorly evil done by Uber.
  - buzzdenver 10y ago
    I' not the OP, but he could have referred to this: http://www.theverge.com/2014/8/26/6067663/this-is-ubers-playbook-for-sabotaging-lyft http://www.theverge.com/2014/8/26/6067663/this-is-ubers-play...
    - HappyTypist 10y ago
      Which is out of context because Uber only started doing it after they caught Lyft bootstrapping that way.

craigvn 10y ago

Blood money while they continue to execute people in the street.

breitling 10y ago
Get off your moral high-ground. We (USofA) still continue to execute people as well.
- seizethecheese 10y ago
  Get out of your moral valley, get a better vantage on the moral topology around you. The USA executes people, true, but generally not political opponents. Saudi is an order of magnitude worse than the US government.
  - gorkemyurt 10y ago
    guess who is Saudi's biggest trade partner? https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia#List_of_trade_organizations https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia#List_o... or who actually sells them guns? https://en.wikipedia.org/wiki/Saudi_Arabian_Army https://en.wikipedia.org/wiki/Saudi_Arabian_Army
    - seizethecheese 10y ago
      Your point that the US is complicit and that our hands are not clean is well taken. There is a moral topology, this isn't black and white.
  - deleted 10y ago
    [deleted]
- dangerlibrary 10y ago
  two wrongs something something. Moral relativism isn't universally accepted, whether you like it or not.
- christophrb 10y ago

deleted 10y ago

[deleted]

CPLX 10y ago

Sincere question, can someone explain to me a plausible scenario at this point by which early investors actually receive a payout even slightly commensurate with their supposedly incredible investment? For example, how can someone in the seed round genuinely be able to cash out given the unbelievable amount of dilution that has taken place. What are the plausible scenarios where this occurs? EDIT: Specifically asking in the context of a valuation that seems to way outstrip any plausible IPO (or complete takeover) valuation, and almost certain liquidation preferences that accompanied these later institutional rounds.

paulsutter 10y ago
Uber has apparently raised $12.5 billion[1] and is valued at over $60 bilion. So seed investors are in fat city as long as the valuation holds. If the valuation goes down, it all depends on the preference multiples (which are likely greater than 1), and how low the value goes. Uber has very significant revenue and growth (see the new Mary Meeker presentation), so they are a very valuable company. It may not be wise the way they are burning cash in China but hey we're all just spectators. [1] Crunchbase says $9B and hasn't been updated to add in this money), https://www.crunchbase.com/organization/uber#/entity https://www.crunchbase.com/organization/uber#/entity
- rexreed 10y ago
  It's only Fat city if there's an exit at that valuation. We're talking Theranos style valuations here that can disappear at any time. They better find an exit scenario before the music stops or it's a world of hurt, especially for the later stage investors.
  - supster 10y ago
    True, but those are the obvious risks you take as an investor. And late stage investors often negotiate downside protection in the form of liquidation multiples or ratchets.
    - 10y ago

Retric 10y ago

Uber needing 3.5B is a huge negative sign IMO. Clearly something is broken with their business model.

sintaxi 10y ago
I tend to agree however its completely plausible the raising is used just to chase after new markets.
koolba 10y ago
> Uber needing 3.5B is a huge negative sign IMO. Clearly something is broken with their business model. If someone is willing to give you $3.5 billion dollars I'd argue you've got a solid business model. Either that you're just really good at raising capital.
- rexreed 10y ago
  Let's revise "solid business model" to "solid ability to sell the company's value". A solid business model doesn't require this sort of continuous cash infusion.
  - rqebmm 10y ago
    require != want
  - jessedhillon 10y ago
    > A solid business model doesn't require this sort of continuous cash infusion. Where is this assumption that this cash is required coming from? A very common use for investment is to accelerate plans which would otherwise unfold over long/impractical timelines. Another common use is to get ahead of competitors. I know much of HN is very eager to see all billion dollar valuations deflate so as to prove that extremely conservative risk profiles are the only strategies worth considering, but there's nothing inherently troubling about a highly-valued, late-stage company raising so much money.
    - 10y ago

slg 10y ago

Putting aside whatever you think about Saudi Arabia or its government, it is inarguable that this move will be highly controversial. It makes me wonder why Uber pulled the trigger on this knowing there will be a backlash. Wouldn't it have to be because of pricing? I wonder if the leadership of Uber simply didn't want to see any dip in the valuation and Saudi Arabia was the only one out there willing to meet that price. It makes me think that $62.5 billion value is completely unrealistic.

deleted 10y ago
[deleted]
dharmon 10y ago
First, public backlash has not stopped Uber from doing things before. Second, all the smart money is either sitting it out and/or can't invest at these levels, and Saudi money in a tech startup is definitely dumb money.

godembodied 10y ago

So what if they execute people for what they think are crimes? Who are you to judge what people should or should not do? What you label as evil someone will label as good. There is no absolute evil/good, as you're trying to portray it. It only your opinion vs. their opinion.

jd3 10y ago
While this is somewhat true, it's a somewhat ridiculous argument to bring up when talking about saudi arabia. I think the west has come to the general consensus that women have rights, and that people should not be beheaded in the streets for denouncing their state religious authority. This hermeneutical matter-of-interpretation crap is no defense for the crimes against humanity that saudi arabia commits regularly.
- godembodied 10y ago
  All of the things you mentioned are relative to a culture. Since you were born in the West, you think of all these things as bad. The indoctrination is so strong that you feel that your opinion is an objective fact. But, the same seriousness and objectivity you attach to your opinions they attach to their. Morality is kinda religion - everyone thinks their God or prophet is the TRUE one, when in fact they've been indoctrinated from early childhood to belive some magical stories. This hermeneutical matter-of-interpretation crap is no defense Do you think you can invalidate something by labeling it as 'crap'? I guess schools today don't teach people how to respond with arguments, instead of insults.
  - Retra 10y ago
    Unless you're about to say you don't have a culture, maybe you should accept that people will argue according the culture they have and leave it at that. It's like I said "I like pepperoni pizza," and you're trying to say "no one kind of pizza is objectively better than the rest, so you have no right to choose pepperoni pizza over any other pizza." But in fact I do have this right, being that I'm the one choosing which pizza to eat. If I disagree with someone's morals, it's because I'm the one who's choosing which morals to disagree with. The "who I am to judge" is the one who's doing the judging. Just like you are with your inane position here.

kafkaesq 10y ago

"Excuse me driver, can you pull over for a minute? I need to beat my servant." http://www.cnn.com/2013/10/31/world/meast/saudi-arabia-beating-video/index.html http://www.cnn.com/2013/10/31/world/meast/saudi-arabia-beati...

cloakandswagger 10y ago
Rumor has it they're working on an on-demand servant beating service called Uber Beats.
- iask 10y ago
  Lol...you guys on a roll!
educar 10y ago
Do you know what came out of the investigation? This was in 2013.
iask 10y ago
Funny...lol. I flew past this post and then suddenly started laughing.

Animats 10y ago

Latest Uber worry: When the Tesla 3 comes out, Uber drivers clogging the fast-charging stations. "Free power for life" is a great deal when you're a cab.

maxerickson 10y ago
I was going to speculate that they will charge for access, but Googling to get the Supercharger name right lead here: http://arstechnica.com/cars/2016/06/no-free-superchargers-for-teslas-model-3-h2-stations-grow-in-ca/ http://arstechnica.com/cars/2016/06/no-free-superchargers-fo... Announced today, they will charge for access.
- semi-extrinsic 10y ago
  Wow, based on the access fee for the early lowest power Model S, along the lines of $2500, if not more? That's what, more than two years of fuel for an economic petrol car?
  - maxerickson 10y ago
    Sure, but it also carries a $15,000 premium over a car that at least matches it on various utility comparisons.
  - bryanlarsen 10y ago
    I certainly hope they don't charge a flat fee, that'll just make the problem worse, not better. Once you pay the fee you'll be inclined to use it as much as you can, "just to get your money's worth". Sort of like how most people overeat at all-you-can-eat restaurants. They need to make sure they charge more than the retail rate for electricity. Make sure it's cheaper to charge at home. It'll still be almost an order of magnitude cheaper than gas.
rconti 10y ago
Elon has always said "access to supercharging". Never said free. Supercharging is a high speed charging process via their stations (I think 440v). The price is completely separate from whether or not you can perform the action.

tomp 10y ago

Saudi Arabia? A country that is itself seeking a cash infusion?! http://www.ft.com/cms/s/0/9dd8cbfe-2755-11e6-8ba3-cdd781d02d89.html http://www.ft.com/cms/s/0/9dd8cbfe-2755-11e6-8ba3-cdd781d02d...

rock57 10y ago

according e.g. to the stories linked below and many previous reports, Uber actively aims to reduce the number of cars on the road, and its efforts, especially Uber Pool will reduce the oil consumption and, as a result, oil prices... And now they get the largest investment yet from a party that is NOT interested in falling oil prices... What am I missing here? https://newsroom.uber.com/us-new-york/taking-1-million-cars-off-the-road-in-new-york-city/ https://newsroom.uber.com/us-new-york/taking-1-million-cars-... http://www.theguardian.com/sustainable-business/2016/may/31/uber-millennials-us-cities-cars-austin-lyft http://www.theguardian.com/sustainable-business/2016/may/31/...

linkregister 10y ago
It seems smart for a sovereign wealth fund to try to diversify its holdings. Exxon and Chevron also invest in renewables, despite the fact that renewables potentially cannibalize oil sales.
hnhire_me 10y ago
> And now they get the largest investment yet from a party that is NOT interested in falling oil prices... Uber's impact will be the same whether they invest or not. Saudia Arabia needs to diversify its holdings and sovereign funding sources as oil is a very narrow and volatile vertical upon which they currently hang their hat (and almost all of their funding). Saudia Arabia is like an investment portfolio where 90% of its income comes from a single stock. They need to diversify and hedge.
dragonwriter 10y ago
> And now they get the largest investment yet from a party that is NOT interested in falling oil prices... What am I missing here? Saudi Arabia (and even moreso prior to the 1990-1991 war, Kuwait, which was among the sources of the tensions leading to that war) invest quite heavily in diverse investments with a focus both on growth and avoiding having fortunes too closely tied to oil.
eruditely 10y ago
earlier this year the deputy crown prince declared his intent to sell 10% of saudi amarco and said he wants to diversify holdings. they're in really bad shape right now.

Mendenhall 10y ago

What I find particularly interesting is Uber now has someone on their board who thinks women should not be allowed to drive? It will be interesting to watch this play out and take note of their policy and public statements. I can see many sources of conflict in such a decision.

dragonwriter 10y ago
Women are not allowed to drive in Saudi Arabia, but that doesn't mean that the particular official given a board seat believes that they shouldn't be allowed to drive (or even that the monarch believes that that's the way things should be, generally; just because its not a democracy doesn't mean that Saudi government policy isn't shaped by a desire to appeal to particular constituencies.)
- Mendenhall 10y ago
  I agree with your statement completely. The thing I notice is he works for the government and I would think he would never be able to say that openly. A competitor could instantly draw that into question and make them defend the point and use it as a propaganda tool. If he says women should be able to drive he goes against the kingdoms laws and those constituents, if he says they shouldnt or stays mute the propaganda one could spin is legion. "Uber board member thinks women shouldnt be able to drive for them"
  - morgante 10y ago
    I think you're overthinking the likelihood of that becoming a controversy. Sovereign wealth funds routinely invest in companies which run contrary to government official policies. Their foremost duty is as investment managers, not politicians.
    - Mendenhall 10y ago
      I dont think it will turn into a controversy at all, but a smart competitor versed in propaganda could easily hit that attack vector. "Ride with Uber and help raise money to suppress women!" "How do you feel as a Uber driver knowing board members dont think women should be able to drive and your actions help support that?"

michaelbuddy 10y ago

60 billion as compared to Microsoft, Lockheed Martin, AT&T, Google. I mean basically we're talking about a high end phone app and supporting company infrastructure around that. 60 Billion for Uber. I'm just not seeing it.

xufi 10y ago
Same here. I do wonder what is up other companies are up to while Uber is doing this. What about Lyft?

arzt 10y ago

Where does Uber rank historically in terms of private capital raised by a pre-ipo tech company? I would imagine very close to #1?

mmayberry 10y ago

Uber wants driverless cars and Saudi Arabia is already half way there...

methehack 10y ago

I've always been a little confused about uber's capital needs. When I first heard about uber, the part I thought was super-clever was that you wouldn't _need_ lots of capital because all the drivers would have their own cars. Leveraging the latent capital of one side of the two-sided market was the genius of it. (Airbnb too) Same for the staffing -- hook up both sides of the market. No need to pay anyone out of your pocket -- in fact, probably there'd be some float for you there. Sure, maybe you have to subsidize one side at first, but not forever. So where's all this cash going? Is the driver side being subsidized to a ridiculous degree still (this is, actually, my guess)? Is there a moonlander (driverless car) in the works? Are the G&A costs off the charts? How could that be, give that the software does the connecting? Is the software _that_ hard to write? I mean, it's good, but it ain't rocket science. (I'm not sure rocket science is even rocket science anymore.) If I'm right that all the cash is still going to make the fares cheap to encourage up-take, it seems to me like Lyft (or another/any fast follower) is in a fantastic position. Let uber burn the capital to sell the idea to consumers, and then step in when it stumbles and walk away with the glory and gold. Place your bets.

cylinder 10y ago
Exactly. They are burning cash to gain market share and will lose that share as soon as they stop. Not many barriers to these apps. Uber is going to implode.
- ng12 10y ago
  Here's the thing -- ride sharing is the least interesting thing about Uber. Uber's expertise is on-demand logistics which is a totally new field at this scale. Ride sharing just happened to be an easy first step. Once they're able to move things around in real-time at a global scale the opportunities are massive.
  - CPLX 10y ago
    People say this a lot, so I am not picking on you, but I don't get this argument at all. Amazon does it, so does Lasership and Seamless and Fedex and WalMart and a million other variations. I don't see any real reason Uber is more adept at adjacent non-core market verticals than any other top tier entrant.

fma 10y ago

Uber has a higher valuation than actual car manufacturing companies (GM, Ford, Honda, etc) http://www.forbes.com/sites/liyanchen/2015/12/04/at-68-billion-valuation-uber-will-be-bigger-than-gm-ford-and-honda/#10b6c8855858 http://www.forbes.com/sites/liyanchen/2015/12/04/at-68-billi...

johansch 10y ago

So Uber will not be moving to electric cars anytime soon then, I guess.

tsmffh 10y ago
Or, they're investing precisely because they will.

mnglkhn2 10y ago

This might have to do with uber's recent effort to become a capital provider for when someone wants to lease/finance a car in order to drive for uber. Those $3.5bn are most likely capital to fund this operation. Uber is getting into financial services.

iask 10y ago

Uber is a fad...and will soon be be moved to the back seat...unless it's too late. One poster might be on to something "...they are trying to get enough money to sustain the subsidies until they kill all existing competition"...62bn for a ride-hailing company?

danielschonfeld 10y ago

I know this isn't new, but if companies have the abilities to raise money from international entities like this, at these kind of sums. All the while, people are locked to their country of citizenship for working rights... is globalization in its Capitalistic form not claiming as prisoners its own citizens?

gdltec 10y ago

Whatever the output, the Uber story will surely be an interesting startup/VC/capitalism case study in the near future.

khc 10y ago

If they can get cash at a good deal, why not? 10 years later, if they do make a truckload of money from overseas expansions, they can pay back their investors with oversea cash without paying American taxes. Double win!

fiatmoney 10y ago
It is typically not legal to pay out (via dividends or share buybacks) to different investors of the same class in differing amounts. I'm not enough of a tax lawyer to say if you can do a miniature version of that by buying back stock of a US company listed on foreign exchanges without repatriating capital, but after arbitrage you would expect the effect to ripple back to the US-listed share price by the same amount.
- khc 10y ago
  This isn't about saving money per share, but using overseas money that many companies now avoid repatriating.
  - fiatmoney 10y ago
    Right, but you can't pay out specifically to overseas investors.

ilaksh 10y ago

Arcade City and/or similar decentralized peer-to-peer blockchain-based systems will make Uber obsolete. Same thing will happen in most other areas.

slackstation 10y ago

I think this is a bridge until the driver-less car can be developed. Once they hit the market, automation will take over but, that same automation will allow for a company with hyper-thin margins or people to loan out their car to a service that transports people. Uber wants to be that company but, there's nothing really stopping the market from having 50+ companies like Uber in it. There will probably be marketplaces that aggregate these smaller services into larger competitive exchanges with spot prices for a ride. If that's the case, it seems like it might take an awful long to make back the billions that Uber is pumping to make markets around the world. On the bright side, everyone has cheaper transportation.

tehabe 10y ago

Saudi Arabia wants to be more independent from its oil production and invest in a oil dependent business. That is satire, right?

cjarrett 10y ago
Agreed, most ludicrous thing I've read today

em3rgent0rdr 10y ago

The Saudis may have lowly motivations for this: Uber will lessen the demand to allow women to drive. http://www.forbes.com/sites/rebeccalindland/2016/06/01/why-ubers-3-5-billion-windfall-is-bad-news-for-some-women/#6a28218f1604 http://www.forbes.com/sites/rebeccalindland/2016/06/01/why-u...

sandworm101 10y ago

If Uber really is so unprofitable that it need saudi cash to keep things ticking over, then how is this not dumping? Few would doubt that Uber is disrupting taxi markets all over the place. That's fine so long as they are the better mousetrap. But if they require billions in cash at this point, long after they are a household name, then they aren't the better mousetrap. They are a cash-rich company trying to drive others out of the business by dumping below-cost product on the market. If their goal really is to survive long enough that they can do away with drivers, this is exactly the sort of practice that trade rules are meant to prevent. We cannot allow corporations to buy out entire markets because we know what happens once they do.

kriro 10y ago

A "we drive you" company taking financing from the only country in the world that prohibits women from driving. I guess that's somewhat noteworthy. Maybe some of that money goes towards Wali notification if a female passenger wants to take a Uber ride in Saudi Arabia. "Your protectee wants to take a ride from A to B. Accept/decline." It'll need an auto accept for women over 45 as they are allowed to travel alone.

syngrog66 10y ago

in short: lawyers, politicians (whether legal donations or illegal bribes), and accountants. each of which will vary by jurisdiction (city, county, state, nation, etc.) yes, the core server-side codebase design/code/operate will be about the same. yes, each taxi operator will own/buy/provide their own hardware. yes, the mobile platform app codebase is fairly unified/common. but... it's all those jurisdictional and market differences. plus, the advantage to subsidize and accelerate, that will likely cause the lion's share of thirst for bootup investor cash. Uber's biggest problem, as a 2000-ish YC/SF-style "software" startup is that there is no Amazon/AWS-like cloud provider of vehicular rides. Because you need, well, vehicles. Which are expensive and messy. Uber needs enough cash to ensure enough vehicles, plus those messy human drivers, plus all those locale/jurisdiction-specific requirements, are satisfied and ready. Human/political/legal costs don't scale up/down anywhere near as well as totally automatable solutions like pure software.

elmar 10y ago

This video explores the Unit Economics of the Uber business and doesn't look good at least in the US market. Why Uber Is A Scam - Math Explains https://www.youtube.com/watch?v=fgQPj90OrQE https://www.youtube.com/watch?v=fgQPj90OrQE

davidiach 10y ago

Can someone please explain to me why people are so much more bullish on Uber than on Tesla?

rajacombinator 10y ago

Raising this much from dumb money seems to be a bad sign ...

bogomipz 10y ago

“Of course we think women should be allowed to drive,” said Jill Hazelbaker, an Uber spokeswoman. “In the absence of that, we have been able to provide extraordinary mobility that didn’t exist before — and we’re incredibly proud of that.” Of course we think women should be able to drive but we have no problem doing business in and with a backwards repressive society that doesn't believe that women have the same rights as men as long as they give us money. Besides such inequalities are a business opportunity since those repressed women need rides. Hey Uber how about "disrupting" the farce that is the Saudi Royal Kingdom.

estefan 10y ago

Since I'm reading "Zero to One", let's try to answer Thiel's "7 questions": 1. Engineering - Have they created a "breakthrough" technology (10x better than current tech)? No. 2. Timing - Is now the right time? Maybe they're gambling that self-driving cars are only a few years away so they can subsidise human drivers until that happens in order to build a brand and demand/market presence. 3. Monopoly - Are they starting with a big share of a small market? Only by subsidising prices which isn't sustainable. 4. People - Do they have the right team? Not sure. 5. Distribution - Their app has widespread distribution and some key partnerships solidify that. 6. Durability - Will the market position be defensible 10 and 20 years in the future? I can't see why it would be. If they're betting the company on self driving cars, then that removes any benefit of a network effect based on a two-sided market. Fast forward 10 years and another well-funded company could pump a city with autonomous cars which would face little barriers to entry (barring regulation, but they'd probably ignore it like Uber have). 7. Secret - Have they identified a unique opportunity that others don't see? Not unless they can move into adjacent markets or have a major ace up their sleeves, but there are so many competitors that it would seem they haven't. They are obviously targetting economies of scale which would mean their plan is to keep prices so low no one else can afford to enter the market barring major technological innovation. This must be why they're burning so much cash. Self driving cars would remove one barrier to entry since once they exist there will be no need to have a pool of human drivers. So in that case there would be no network effect to act as a barrier, only any effects of economies of scale. That means there's potentially no monopoly being fought over, and therefore no monopoly rents to be gained. Economies of scale take funding to break into, but probably won't inherently create a monopoly with a significant defensible position a well-funded competitor couldn't break into. Is their valuation the result of a bubble because investors have few other places to put their money? Google invested, probably just hedging their bets or buying access to a future market, and now their valuation keeps spiralling...

hackney 10y ago

Considering Saudi Arabia likes their slaves, I find it quite coincidental they would invest in what is a perfect scheme to get uber to provide what for that country will be a ton of slave drivers. Remind me never to use uber.

TrevorJ 10y ago

Ironic that Uber would take cash from a country that won't even allow women to drive...